Foreign Investors’ Ban And Exemptions On Real Estate Investment
September 28, 2023
Real Estate
The recent ban on foreign home buyers and investors in Canada, as per the Non-Canadians Act, requires careful consideration before real estate investments. It aims to control housing costs and aid locals. Foreign buyers must assess regulations, economic trends, taxes, and more for informed investments in Calgary’s real estate market.
Understanding the ban on foreign homebuyers and investors in Calgary
The ban restricts non-residents, including non-resident corporations, from purchasing or investing in residential property for the purpose of flipping or speculating. The goal is to make homeownership more affordable for local residents, as foreign investors can often drive up housing prices.
It’s essential to remember that the ban only applies to residential properties and not commercial ones. Additionally, there are exemptions to the ban, such as foreign students who need housing, foreign employees transferring to Calgary, and foreign buyers who plan to live in the property for at least six months of the year.
Foreign buyers and investors should also be aware of the penalties for violating the ban, which can be steep. Those found breaking the rules could face fines, imprisonment, or deportation. It is always wise to consult with a legal expert before making any investments in Calgary’s real estate market.
Overall, it’s essential to understand the ban on foreign home buyers and investors in Calgary and consider whether it will impact your investment decisions. It’s also important to research current regulations, economic trends, and taxation to make informed decisions for your investment portfolio.
Exemptions to the ban
While the ban on foreign home buyers and investors in Calgary may seem restrictive, there are several exemptions to consider before making any investment decisions.
1. Foreign Students- Students who need housing are exempted from the ban. Universities in Canada are popular destinations for international students, and they often seek affordable housing options. Foreign students planning on staying in the city for a considerable amount of time can invest in real estate and rent out their property while studying.
2. Foreign Employees Transferring to Calgary- The ban does not apply to foreign employees who are transferring to Calgary with their employer. They can purchase homes for their personal use to stay during their time in the city. Provided they have 183 days or more remaining on their work permit at the time of buying a home.
3. Foreign Buyers Planning to Live in the Property- Foreign buyers who plan to live in the property for at least six months of the year are exempted from the ban. They can purchase residential properties for their personal use and enjoy all the benefits of owning property in the city.
4. Refugees- Refugees who are entitled to work in Canada under the Immigration and Refugee Protection Regulations, and have a valid work with 183 days or more remaining on their work permit at the time of buying a home, will be allowed to purchase residential property in Canada.
It is important to note that these exemptions have specific criteria that must be met to qualify. It is always wise to consult with a legal expert to ensure that you are meeting all the requirements before making any investment decisions in Calgary’s real estate market.
Impact of the ban on the real estate market in Calgary
While the ban affects a small segment of buyers, and the ban’s impact on the real estate market in Calgary is as follows:
1. Prices- Since the ban’s introduction, the prices of homes and properties have remained stable, even increasing on some occasions. This stability is mostly due to the limited supply and high demand in Calgary’s real estate market.
2. Demand- The demand for homes and properties in Calgary has decreased somewhat due to the ban’s introduction. While some foreign buyers have been deterred from investing, the demand for real estate in Calgary remains strong, driven mostly by the city’s growing population.
3. Investment- The ban has impacted Calgary’s real estate investment market. Many foreign investors who previously invested in residential properties and rental properties have turned to other investment opportunities.
4. Economic Growth- The ban’s impact on Calgary’s general economic growth remains uncertain. On one hand, the ban has encouraged local investment and helped stabilize the real estate market. However, on the other hand, it may discourage foreign investment in other sectors of the economy.
Overall, the ban’s impact on Calgary’s real estate market remains complex and multifaceted. While it has had some negative effects, it has not significantly impacted the overall stability and growth of Calgary’s real estate market. Ultimately, the true impact of the ban will only be understood over time as the city’s real estate market continues to evolve and adapt to changing circumstances.
Reviewing the Regulations for Foreign Home Buyers and Investors
Before considering investing in Calgary’s real estate market as a foreign buyer, it is essential to understand the regulations and policies involved. Here are five regulations that foreign buyers and investors need to pay attention to:
1. Foreign Ownership Restrictions- The Canadian government heavily regulates foreign ownership of real estate in the country. Foreign investors can purchase existing properties but need approval from the government.
2. For Purposes of Development- Vacant land zoned for residential and mixed use can now be bought by non-Canadians and used for any purpose by the buyer, including residential development. In addition to the purchase of residential real estate in Canada for the purpose of development; certain entities, including publicly traded real estate investment trusts, are now no longer subject to the Ban.
3. Capital Gains Tax- Foreign buyers and investors are also subject to capital gains taxation if they sell their property for more than they paid for it. This tax must be paid at the time of sale, and the percentage varies depending on the duration of ownership.
4. Non-Resident withholding Tax- Non-Resident withholding Tax applies to properties that generate rental income. Canada Revenue Agency (CRA) can deduct a percentage of the rental income before it is paid to the property owner through a mechanism called “Withholding Tax.”
5. Financing Regulations- Foreign buyers and investors may find it challenging to get approved for financing for their investment in Calgary’s real estate market. Many lenders require proof of Canadian income and assets or a Canadian co-signer to finance a purchase.
It is essential to consult with a real estate lawyer or a financial advisor to navigate the regulations and policies surrounding foreign ownership in Calgary’s real estate market. Understanding these regulations can help foreign buyers and investors make informed decisions when investing in Calgary’s real estate market.
Legal Considerations and Requirements for Foreign Buyers/Investors
In addition to regulations, foreign buyers and investors must also consider legal requirements and considerations when investing in Calgary’s real estate market. Here are a few key areas to keep in mind:
1. Tax Obligations- Foreign buyers and investors are subject to Canadian tax laws and must comply with regulations regarding their income and assets. It is important to understand these tax obligations before making an investment.
2. Immigration Status- Foreign buyers and investors must have legal immigration status in Canada to make a real estate purchase. This means obtaining a visa, work permit, or permanent residency.
3. Property Ownership- Foreign buyers and investors must also understand the laws and regulations regarding property ownership in Calgary. For example, there may be restrictions on the type of property that can be purchased or limitations on the duration of ownership.
4. Contractual Obligations- When making a real estate purchase, foreign buyers and investors must comply with contractual obligations, such as mortgage agreements and property management contracts.
5. Legal Representation- Foreign buyers and investors should also consider hiring legal representation to help navigate the complex legal requirements and regulations involved in a real estate purchase.
Overall, foreign buyers and investors must conduct thorough research and seek expert advice before making any investment in Calgary’s real estate market. Understanding both the regulations and legal requirements involved can help mitigate potential risks and ensure a successful investment.
How to Navigate the Application Process for Exemptions
Foreign homebuyers and investors must navigate through the complex application process for exemptions in order to comply with the regulations and legal requirements when investing in Alberta’s real estate market. For example, for Vacant lands in Alberta see “Regulations surrounding foreign ownership of Canadian land, and how to apply for an exemption” at: https://www.alberta.ca/foreign-ownership-land#exemptionTo successfully navigate this process, here are some essential factors to consider:
1. Understand the Requirements- It is important to understand the eligibility requirements for exemptions such as the Non-Resident Speculation Tax and the Foreign Buyer Property Transfer Tax. This will help ensure that you meet all necessary criteria before submitting an application.
2. Research Available Exemptions- It is crucial to research all factors relevant to apply for exemption. This can help you choose which exemptions to apply for and increase your chances of a successful application. For instance, foreign citizens and foreign controlled corporations may own or beneficially own up to 2 parcels of controlled land not exceeding 20 acres in total.
3. Gather Required Documents- Collect all necessary documents required for each exemption application such as passports, visas, and proof of income. These documents may vary depending on the type of exemption you are applying for.
4. Understand the Application Process- Each exemption application process may vary, and it is important to understand the specific requirements, deadlines, and submission procedures. Some applications may require the assistance of an experienced professional to ensure that you provide all necessary information accurately.
5. Seek Expert Advice- Hiring a professional consultant or real estate attorney can be beneficial in navigating the complex application process for exemptions. They can help you understand the legal requirements, regulations, and procedures involved and increase your chances of a successful application.
By understanding and following these essential factors, foreign homebuyers and investors can navigate through the application process for exemptions and comply with regulations and legal requirements when investing in Calgary’s real estate market.
Engaging with a reliable and experienced real estate agent and real estate lawyer to navigate the ban
Building professional networks is crucial for any business, and this is especially true for foreign investors in Calgary. Connecting with local real estate agents, lawyers, bankers, and other professionals can help you navigate the market successfully.
Navigating the ban on foreign home buyers and investors in Calgary can be challenging, but working with a reliable and experienced real estate agent and real estate lawyer can help navigate the market successfully.
Here are some reasons why engaging with a real estate agent is crucial:
1. Expert Knowledge – A reliable and experienced real estate agent is familiar with the real estate market and can provide valuable insights on the ban and its implications. They can guide homebuyers and investors through the entire process and help them understand their options.
2. Access to Opportunities – Real estate agents have access to a wide range of properties and investment opportunities. They can provide a curated list of properties that are available for purchase by foreign buyers, navigating the ban regulations.
3. Negotiation Skills – Real estate agents have excellent negotiation skills and can advocate for their clients to get the best deal possible. They can help foreign investors negotiate a fair price and secure favorable terms to protect their interests.
4. Local Network – Real estate agents have a local network of professionals, including lawyers, bankers, and other industry professionals. This network can help navigate the regulatory requirements and provide access to resources that can help streamline the transaction process.
5. Compliance with Regulations – A knowledgeable real estate agent can ensure that all legal requirements and regulations are followed when buying or investing in property in Calgary. This can help foreign buyers avoid costly mistakes and legal issues.
Engaging with a reliable and experienced real estate agent can help foreign homebuyers and investors navigate the ban successfully and make informed decisions when investing in the Calgary real estate market.
Conclusion
1. The ban on foreign homebuyers and investors in Calgary creates a unique set of challenges for those interested in purchasing property in the city.
2. Working with a reliable and experienced real estate agent can provide valuable insights, access to opportunities, negotiation skills, a local network, and compliance with regulations.
3. It is crucial for foreign buyers to navigate the ban carefully and make informed decisions when investing in the Calgary real estate market.
4. Despite the ban, Calgary remains an attractive destination for investors seeking a stable and lucrative real estate market.
5. With the right guidance and resources, foreign investors can navigate the ban and successfully invest in the Calgary real estate market for the long-term.
To find out more, contact us at 403-300-5297 or email us at info@lawsnbeyond.com.
